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Tuesday, February 16, 2016

Flying high: Air India plans Dreamliners' push to regain supremacy

IN AN attempt to regain its position as the king of domestic skies and challenge IndiGo’s monopoly, Air India is mulling to raise its capacity on domestic routes by using wide-bodied Boeing 787 Dreamliner planes. The carrier plans to use them in its high-capacity routes, says a media report.
At the same time, the airline will...fly the A320s between the Tier-2 and Tier-3 cities, which experts believe has huge potential due to the government’s stress on regional route expansion.
Data from DGCA shows that Air India has a market share of 16.4 percent for the year 2015. Market leader IndiGo is almost double at 36.2 percent of the market. Meanwhile, data from the International Air Transport Association (IATA) shows that domestic sector in India grew by 20.2 percent in 2015 — the highest in the world.
“Immediately, we need to strengthen the domestic market and increase capacity. We will strengthen the existing routes by adding capacity because there is a huge potential in this market,” a top Air India official was quoted as telling a national financial daily.
At present, the national carrier uses the narrow body Airbus A320 on high-capacity routes.
“Slowly, we will introduce Dreamliners in metros like Mumbai-New Delhi route. We find it will be feasible to offer a high-end product like the Dreamliner will do well on these routes,” the official added. Air India’s 787s have 256 seats each, 18 of the business class and 238 economy seats.
The official also said that that a passenger will be ready to pay Rs 200 more for amenities a 787 can provide like more legroom space and higher luggage allowance, which a no-frills carrier cannot provide, we can wipe out the competition there. He said passengers won’t mind spending some extra money for good amenities.
Air India will slowly phase out the A320s operating in the neighbouring countries like Gulf and Middle East and deploy it on the regional routes in order to add capacity.
With falling ticket prices, the Tier-2 and Tier-3 cities are generating a lot of traffic. We will be looking at those cities because the 150-160 seater A320s are the right size of aircrafts on such routes.
Air India has already tied up for dry leasing 14 new engine technology A320 neo planes which are to be inducted in the financial year 2017, the official said adding the airline plans to dry lease another 30 narrow body aircraft (A320s) in its fleet over a three periods in its bid to augment capacity.
In 2015, airlines in India flew 81 million passengers in 2015 out of which Air India had only 13.33 million.
“The market leader is deploying almost 95 percent of its capacity on domestic routes where as we have just 25 percent our aircraft functioning in such routes. Our calculation says that if we deploy 50 percent capacity in domestic routes, our market share target is 50 percent.
The government last year appointed Ashwani Lohani, known for his skills to revitalize loss making PSUs as the new chairman and managing director of the national carrier.
Once India's biggest carrier, Air India's market share has tumbled to about 15 percent amid rising competition from nimbler private sector rivals. It is sitting on Rs 500 billion ($7.6 billion) of debt and annual interest costs of $600 million are hampering investment in its revival. Lohani was appointed as the boss of Air India to fix the financial troubles of debt-burdened national carrier, which last made a profit in 2007.
The airline, which received a $5.8 billion government bailout in 2012. Air India is eyeing operational profits for the first time in a decade this fiscal, two years ahead of the target as per its turnaround plan. Lower fuel prices coupled with improved operational performance are being cited as the two main reasons for this happy state of affairs and airline officials say net profit could similarly be advanced by two years.